How AIFI Can Help You Beat Price Volatility

January 31st, 2017 by aifi

Price volatility can be destructive for any company not properly prepared. American International Foods, Inc. has experience supplying over 2,500 ingredients to food and beverage manufacturers. This gives AIFI the knowledge and tools to develop specialized solutions to help their customers combat price volatility.

Egg Market Skyrockets

Recent volatility has caused egg prices to increase by 120%. As a result of the bird flu in 2015, many facilities were forced to get rid of egg laying hens. Supplies of eggs were decimated. In some cases, prices of egg derivatives quadrupled. Manufacturers without contracts or alternative ingredients were forced to pay the higher costs to obtain the eggs they needed.

Foreign Demand for Guar Gum

Guar Gum, commonly used for baking and a thickening agent, witnessed a sudden increase in demand when oil and gas companies started using the material for fracking explorations. Gas and oil companies started purchasing large amounts at a time, which took a huge cut out of the supply available. This in turn caused the price of guar gum to sky rocket and caused a substitution effect that forced a lot of food manufactures to find another solution.

Poor Garlic Crops

The price of garlic is becoming increasingly volatile due to poor crop conditions in China, which is responsible for producing roughly two-thirds of the world’s garlic supply. The province of Shandong (China’s main garlic producing province) has been experiencing poor weather and soil conditions. These conditions have affected the garlic crops in the past and could continue in the future. The price of garlic is becoming more and more volatile as a result of suppliers speculating on the harvest conditions.

Solutions

How you plan and react to these events is the key to combating price volatility. There are 4 typical reactions to these instances:

Recommended:

1. Contact your AIFI representative

Your AIFI rep can help you prepare for any of these scenarios before it’s too late. A well- structured plan in place beforehand will give you the upper hand when prices/supply changes drastically enabling you to continue your business without major losses.

2. Find an Alternative Ingredient

Finding an alternative ingredient (that will perform as well or better) is a great back-up plan to have. Your AIFI representative can help you find an alternative ingredient that can replace one that is currently high in price or low in supply. Knowing you have an alternative ingredient to fall back on is a great tool to avoid losing time, profits and customers.

Not Recommended:

3. Increase Price on your Product

In order to combat a price rise in ingredients, some companies will chose to raise the price of their products; but this in turn can have negative results. Raising your price can lead to the lowering of your market share as well as inviting unwanted competition.

4. Continue Buying at Market Price

Continuing to buy ingredients (as the price increases) will raise your costs and in turn lower your profits. Instead of losing market share you run the risk of losing capital and profits.

How American International Foods, Inc. Can Help You:

Powerful Solutions:

Our passion, experience and knowledge of industry trends and cutting edge market information enables our team to offer the best pricing and product information possible, providing you the support to grow your business and profits.

Peace of Mind:

American International Foods takes pride in making the process of finding and ordering ingredients less stressful for our customers. With consistent communication, accessibility to over 2,500 ingredients, and reliable delivery operations, AIFI creates an easy solution for all of your ingredient needs. Give us a call today to see how we can show you the same benefits we are currently showing our customers. 866.944.2434